Crime Watch: February 26, 2013

The United States has asked a federal court in Memphis, Tennessee, to permanently bar husband and wife team Ahmed Grant and Lillian Madyun from preparing federal income tax returns for others, the Justice Department announced February 22. According to the government complaint, Grant and Madyun have operated multiple tax return preparation businesses in the Memphis area, including SuperFast Taxes, MG Services, and most recently, Taxes-R-Us.

The complaint alleges that Grant and Madyun have prepared returns that unlawfully overstate refunds and understate tax liability through a variety of schemes.

Specifically, the government alleges that Grant and Madyun have prepared returns that unlawfully claim the Earned Income Tax Credit (EITC) for their clients by reporting fictitious Schedule C business income. The government alleges that Grant and Madyun also prepared returns that claimed the American Opportunity Credit, to which their clients were not entitled, without their clients' knowledge or consent. According to the complaint, 90 percent of the American Opportunity Credits claimed on their clients' returns were false.

The complaint further alleges that Grant and Madyun improperly ensured that their clients' refunds were deposited into their own business's bank account. The estimated harm to the government is over $2 million for the 2010 tax year alone, and may be as high as $5 million, according to the complaint.

The Justice Department announced February 21 that it has asked a federal court in Detroit to permanently bar Calvin Carter and brothers Raheen Stroud and Laron Stroud, who do business as E-File Tax Pros LLC and Tax King, from preparing federal tax returns. The civil injunction suit alleges that Carter and the Stroud brothers falsify customers' income on their tax returns, frequently by fabricating business income and expenses, in order to claim the maximum EITC for them.

According to the complaint, Carter and the Stroud brothers fabricated businesses and reported fake business income and expenses on their customers' tax returns to achieve reported income in the EITC "sweet spot." The complaint alleges that the defendants filed tax returns in 2009, 2010, and 2011 that had an extremely high refund request rate of 97 percent.

The complaint also alleges that the defendants prepare returns for customers that falsely claim the First-Time Homebuyer Credit, even though the customers had not bought new homes and were ineligible for the credit.

Source: US Department of Justice

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Justice Department Seeks to Shut Down New Jersey Tax Return Preparer

The United States has asked a federal court in Camden, New Jersey, to bar Doris E. Baules, who operates D'Vazquez Tax Solutions, from preparing tax returns for others, the Justice Department announced February 21. According to the government complaint, Baules continually and improperly claimed the EITC on her clients' returns to enable them to receive erroneous tax refunds. The suit alleges that the defendant improperly increases their EITC claims.

According to the complaint, the IRS previously conducted an investigation into the tax returns that Baules prepared for the 2009 tax year and assessed $12,500 in return preparer penalties against her because she failed to exercise due diligence in determining whether her clients were entitled to the EITC. Baules continued to claim increased EITC on returns she prepared, even after the IRS contacted her. According to the complaint, the total harm to the US Treasury caused by Baules' misconduct is estimated to be as high as $6.2 million.

Source: US Department of Justice

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Ohio Federal Court Bars Appraiser of Historic Preservation Easements

A federal court in Cleveland has barred MAI-designated real estate appraiser Michael Ehrmann and his firm, Jefferson & Lee Appraisals Inc., from preparing property appraisals for federal tax purposes, the Justice Department announced February 13. Judge Dan Aaron Polster of the US District Court for the Northern District of Ohio signed the civil injunction order against Ehrmann and Jefferson & Lee Appraisals. The defendants consented to the injunction without admitting the allegations against them.

Federal law allows a taxpayer in certain limited circumstances to claim a charitable deduction for the value of a conservation easement donated to a qualified organization. The easement's value must be determined by a qualified appraiser. According to the government complaint, Ehrmann's appraisals repeatedly overstated the value of conservation easements placed on historic properties, including the Book Cadillac Hotel in Detroit and the Powerhouse Building in the Flats District of Cleveland.

In its complaint, the government contends that Ehrmann distorted data and provided misinformation or unsupported personal opinions to get artificially high values for conservation easement donations. The complaint also alleges that "Ehrmann knows that his clients will use the inflated values provided in his appraisals to claim overstated charitable contribution deductions." According to the government complaint, the amount of improper tax deductions attributable to Ehrmann's flawed appraisals could reach hundreds of millions of dollars.

In 2011, in the US District Court for the District of Columbia, the Justice Department obtained an injunction against the Trust for Architectural Easements, formerly known as the National Architectural Trust, barring it from engaging in abusive practices relating to the valuation and donation process for historic conservation easements.

Source: US Department of Justice

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Five Individuals Sentenced in Related Tax Refund Schemes

Five defendants in California, who participated in related schemes to manipulate and defraud the First-Time Homebuyer Credit, were sentenced February 14 and in late January in United States District Court.

Appearing before United States District Judge R. Gary Klausner, the five defendants sentenced were:

Tanooa Sparks, thirty-five of Gardena, was sentenced this morning to twelve months and one day imprisonment and ordered to pay restitution of $338,926 to the IRS after pleading guilty in September of 2012 to one count of conspiracy to submit false claims to the IRS and two counts of submitting false claims to the IRS;

Nadjara Payne, twenty-six, of Inglewood, was sentenced this afternoon to eight months imprisonment and ordered to pay restitution of $173,358 to the IRS after pleading guilty in March 2011 to one count of conspiracy to submit false claims to the IRS and one count of use of one or more unauthorized access devices, namely debit card account numbers;

Crystal Bennett, twenty-nine, of Gardena, was sentenced earlier this week to four months imprisonment and ordered to pay restitution of $105,353.62 to the IRS after pleading guilty in November 2010 to conspiracy to submit false claims to the IRS;

Dontray Greer, twenty-eight, of Los Angeles, was sentenced late last month to eight months imprisonment and ordered to pay restitution of $155,000 to the IRS after pleading guilty in March 2011 to conspiracy to submit false claims to the IRS and possession of fifteen or more unauthorized access devices; and

Gina Smith, forty-five, of Las Vegas, Nevada, was sentenced late last month to three years of probation, including six months home detention, and ordered to pay restitution of $77,253 to the IRS after pleading guilty in November 2010 to conspiracy to submit false claims to the IRS.

Most documents were filed with the court under seal; however, according to a sentencing memorandum filed by the defense for Greer, Greer and others used their own personal identifying information and/or that of others to file 2008 tax returns that falsely claimed the First-Time Homebuyer Credit. The resulting tax return payments were then directed into bank accounts or onto VISA debit cards controlled by the defendants.

Greer and others assisted in obtaining personal information from susceptible individuals, some homeless and drug addicted, to manipulate the government's First-Time Homebuyer Credit program and use the proceeds from their scheme to better themselves and purchase personal items. Although the defendants and the individuals they recruited never purchased homes, they filed, or assisted in the filing of, tax returns in 2009 claiming otherwise. The participants who provided the information received between $500 and $1,000 for their cooperation in the scheme.

In a related but separate scheme, Lakieta Phillips, twenty-seven, of Hawthorne pleaded guilty in January to one count of conspiracy to submit false claims to the IRS. Phillips is scheduled to appear before Judge Klausner on May 13 for sentencing. The charge of conspiring to submit false claims to the IRS carries a statutory maximum sentence of ten years in federal prison.

A Nipomo woman has pleaded guilty of orchestrating a tax scheme involving stolen identities as well as a loan fraud scheme in which she submitted false income tax returns that overstated her income in an effort to obtain a $1.6 million loan.

Imelda Sanchez, forty, pleaded guilty on February 11 to one count of making false claims against the government and one count of making false statements on a loan application.

According to the plea agreement – working in the business of bookkeeping and tax preparation – Sanchez engaged in a scheme to submit false tax returns to the IRS in order to obtain tax refunds. Sanchez admitted she made these false claims by using the names and Social Security numbers of relatives and former clients without their authorization.

As part of the scheme, Sanchez prepared a false 2005 federal income tax return in the name of an unidentified victim which falsely claimed a $3,695 refund. The refund was based on a false Form W-2 claiming $12,831 in wages and fraudulent tax credits claiming two dependent children.

In addition, Sanchez pleaded guilty to making false statements to Santa Lucia Bank by submitting false personal income tax returns in application for a $1,640,000 loan.

When sentenced by District Court Judge Philip S. Gutierrez on May 13, 2013, Sanchez faces a statutory maximum sentence of thirty-five years in federal prison and a fine of $1,250,000.